The key problem that I believe conservativism has to face in 2013 and the near future is that it doesn't have an answer to what has become the most critical problem for the 21st century economy: inequality.

There has been a historical tendency over the past 15 years and three Presidents to concentrate more and more wealth with the wealthy, and less and less wealth with everybody else. Inequality is at all time highs on that front, and it gives the middle and lower classes less spending money, slogs down the economy, and ultimately splits the economic pie even greater into the hands of the few.

Liberalism has a whole host of solutions, bordering from the more free market tendencies of the Democratic Party and the mainstream liberal movement, to the more socialist suggestions frequently made by the party's left wing. Some of them can be argued as legitimately good ideas (raising the minimum wage, capping the multi-billion dollar tax breaks for huge corporations, any number of investments in college education), some of them are obviously more on the fringe.

Conservativism's answer seems to be singular and ineffective: get "government out of the way," undo the massive structure of government regulation, and the economy will grow. And like a rising tide that lifts all boats (think "trickle down" economics), as the economy grows, so too will the fortunes of the lower and middle classes. Honestly, if conservativism has more of a message than this right now with regards to inequality, I've missed it.

The problem with this message, and conservativism in general right now, is that it seems outdated for 2013. As the economy has grown at times throughout the past fifteen years, the middle class and working poor have seen less and a less of a return on that progress, and the upper class has soared. In other words, the absolute core conservative response to the biggest issue affecting working Americans in 2013 is no longer applicable. It had some bearing, perhaps, in previous decades, but we now reside in an era where this dynamic no longer holds water.

Economists are reportedly attempting to figure out why that is the case. A decrease in education quality seems, to me, to be the most convincing cause, although obviously this is something that deserves a holistic analysis.

But either way, I don't really see convincing analysis that growth is enough anymore. It seems that a reduction in inequality seems now to be just as important.

Growth isn’t enough to help the middle class
By Jim Tankersley
Published: February 13

Two kinds of middle-class Americans are struggling today — people who can’t find any work or enough work, and full-timers who can’t seem to get ahead.

Democrats and Republicans prescribe economic growth to help both groups. There was a time that would have been enough. But not today.

In the past three recoveries from recession, U.S. growth has not produced anywhere close to the job and income gains that previous generations of workers enjoyed. The wealthy have continued to do well. But a percentage point of increased growth today simply delivers fewer jobs across the economy and less money in the pockets of middle-class families than an identical point of growth produced in the 40 years after World War II.

That has been painfully apparent in the current recovery. Even as the Obama administration touts the return of economic growth, millions of Americans are not seeing an accompanying revival of better, higher-paying jobs.

The consequences of this breakdown are only now dawning on many economists and have not gained widespread attention among policymakers in Washington. Many lawmakers have yet to even acknowledge the problem. But repairing this link is arguably the most critical policy challenge for anyone who wants to lift the middle class.

Economists are not clear how the economy got to the point where growth drives far less job creation and broadly shared prosperity than it used to. Some theorize that a major factor was globalization, which enabled companies to lay off highly paid workers in the United States during recessions and replace them with lower-paid ones overseas during recoveries.

There is even less agreement on policy prescriptions. Some liberal economists argue that the government should take more-aggressive steps to redistribute wealth. Many economists believe more education will improve the skills of American workers, helping them obtain higher-paying jobs. And still others say the government should seek to reduce the cost of businesses to create new jobs.

The problem is relatively new. From 1948 through 1982, recessions and recoveries followed a tight pattern. Growth plunged in the downturn, then spiked quickly, often thanks to aggressive interest rate cuts by the Federal Reserve. When growth returned, so did job creation, and workers generally shared in the spoils of new economic output.

You can see those patterns in comparisons of job creation and growth rates across post-World War II recoveries. Starting in 1949 and continuing for more than 30 years, once the economy started to grow after a recession, major job creation usually followed within about a year.

At the height of those recoveries, every percentage point of economic growth typically spurred about six-tenths of a percentage point of job growth, when compared with the start of the recovery. You could call that number the “job intensity” of growth.

The pattern began to break down in the 1992 recovery, which began under President George H.W. Bush. It took about three years — instead of one — for job creation to ramp up, even when the economy was growing. Even then, the “job intensity” of that recovery barely topped 0.4 percent, or about two-thirds the normal rate.

The next two recoveries were even worse. Three and a half years into the recovery that began in 2001 under President George W. Bush, job intensity was stuck at less than 0.2 percent. The recovery under President Obama is now up to an intensity of 0.3 percent, or about half the historical average.

Middle-class income growth looks even worse for those recoveries. From 1992 to 1994, and again from 2002 to 2004, real median household incomes fell — even though the economy grew more than 6 percent, after adjustments for inflation, in both cases. From 2009 to 2011 the economy grew more than 4 percent, but real median incomes grew by 0.5 percent.

In contrast, from 1982 to 1984, the economy grew by nearly 11 percent and real median incomes grew by 5 percent.

Today, nearly four years after the Great Recession, 12 million Americans are actively looking for work but can’t find a job; 11 million others are stuck working part time when they would like to be full time, or they would like to work but are too discouraged to job-hunt. Meanwhile, workers’ median wages were lower at the end of 2012, after adjustments for inflation, than they were at the end of 2003. Real household income was lower in 2011 than it was in 1989.

Obama alluded to the breakdown between growth and middle-class wages and jobs in his State of the Union address. “Every day,” he said, “we should ask ourselves three questions as a nation: How do we attract more jobs to our shores? How do we equip our people with the skills needed to do those jobs? And how do we make sure that hard work leads to a decent living?”

But outside of some targeted help for manufacturing jobs and some new investments in skills training, the proposals Obama offered focused comparatively little on repairing the relationship between growth and jobs, or growth and income. Obama’s boldest plans included increasing the minimum wage and guaranteeing every child a preschool education. Both aim largely at boosting poorer Americans and helping their children gain a better shot at landing the higher-paying jobs.

The Republican response to Obama’s speech did not appear to nod to the new reality at all. Sen. Marco Rubio (Fla.) said that “economic growth is the best way to help the middle class” and offered few job-creation proposals that appeared materially different from what Republican politicians have pushed since the 1980s.

Economists are still trying to sort out what broke the historical links between growth and jobs/incomes.

Economists are still trying to sort out what broke the historical links between growth and jobs/incomes.

Federal Reserve Bank of New York economists Erica Groshen and Simon Potter concluded in a 2003 paper that the recoveries from the 1990 and 2001 recessions were largely “jobless” because employers had fundamentally changed how they responded to recessions. In the past, firms laid off workers during downturns but called them back when the economy picked up again. Now, they are using recessions as a trigger to lay off less-productive workers, never to hire them back.

Economists at the liberal Economic Policy Institute trace the problem to a series of policy choices that, they say, have eroded workers’ ability to secure rising incomes. Those choices include industry deregulation and the opening of global markets on unfavorable terms for U.S. workers.

In the latest edition of their book “The State of Working America,” EPI economists argue that an “increasingly well-paid financial sector and policies regarding executive compensation fueled wage growth at the top and the rise of the top 1 percent’s incomes” at the expense of average workers.

Robert Shapiro, an economist who advised Bill Clinton on the campaign trail and in the White House, traces the change to increased global competition.

“It makes it hard for firms to pass along their cost increases — for health care, energy and so on — in higher prices,” he said. “So instead they cut other costs, starting with jobs and wages.”

Shapiro said the best way to restart job creation is to help businesses cut the costs of hiring, including by reducing the employer side of the payroll tax and pushing more aggressive efforts to hold down health-care cost increases.

Obama seems to have embraced an approach pushed by Harvard University economists Claudia Goldin and Lawrence Katz: helping more Americans graduate from college and go on to high-skilled, higher-paying jobs. It’s a longer-term bet. But as senior administration officials like to say, the problem didn’t start overnight, and it’s not likely to be solved overnight, either.

Well, if you want to go by the strict definition of a liberal, I don't know if it qualifies, but the term 'liberal' nowadays seems go be hand-in-hand with with the concept of statism. Tax-repricing, or, a tax code that interferes with with a free market is certainly a statist approach.

You think conservatives are more inclined (or even equally inclined) toward this type of thing than liberals? It's not possible that you really believe that.

It's a reality that we are playing on the liberal playing field of a complex, progressive income tax. Conservatives, generally speaking, have a goal of achieving a flatter, broader-based, more neutral toward social and economic behavior tax code, but they understand that they have to deal with reality. So, for example, falling short of a broad-based tax on consumption, they support measures that move us a little closer to that ideal like IRAs and HSAs.

__________________

“The American people are tired of liars and people who pretend to be something they’re not.” - Hillary Clinton

Inequality is fine...if people work harder, or smarter, they should be rewarded for that. If they lay about and watch TV all day, they should get what they deserve. There is no reason to take from the people that work hard and give to the people that don't do shit.

The problem, is the people that already have a ton of money have huge influence on the lawmakers. And they rig the game so that they keep making more, and taking more, and to hell with giving anyone else a fair shot. They basically make policy that allows them to do shit that should be illegal, like the shit that goes on in the derivatives market, the repealing of the glass-steagal act, and countless other shit.

The solution starts with campaign financing reform. Without that nothing is ever going to change.

The problem is that the government has too much power. As long as government has too much power, there will always be people vying for some of it. The solution starts with limiting government, so that it doesn't have goodies to dole out. Campaign Finance Reform would just lead to people finding other ways to influence politicians to their benefit.

When it comes to the tax code, the conservative vs. liberal divide is on a flat tax (conservative) vs. a progressive tax (liberal).

A flat tax, of course, raises taxes on something like 95%, whereas the wealthy get a huge tax cut.

In an age of extreme inequality, that's only going to make the problem worse.

But that's not the only divide. Liberals are far more interested in social and economic manipulation via the tax code as a matter of philosophy.

A great example is this political BS that Obama spews about big oil subsidies. The vast majority of what he's talking about are things like general deductions that all corporations are eligible to take. What he's really proposing is a targeted tax penalty on an industry that isn't particularly supportive of democrats.

The same is true of his BS about ending the "tax breaks" for shipping jobs overseas. Those "tax breaks" are really just things like the general tax provision that allows businesses to deduct expenses from revenue in the normal calculation of income and the traditional concept of allowing companies to deduct foreign taxes for income earned in those jurisdictions so that they remain competitive with foreign companies. In other words, he wants special tax treatment to punish companies who have jobs overseas.

__________________

“The American people are tired of liars and people who pretend to be something they’re not.” - Hillary Clinton

Source: acivilamericandebate .com; "A 30 year growth of Income Inequality. Posted on April 10, 2011

"In 1928, the top 1% was taking in 23.9% of earnings. With that degree of inequality, there was not enough income and wealth and available within the rest of the population (the bottom 99%) to sustain prosperity. In 1976, just before the Reagan Revolution, the top 1% was taking in 8.9%.

The top tax rate becomes too low to maintain stable income inequality.

With the lowering of the top income tax rate in 1981, the percentage of income of both the top 10% and the top 1% began to increase sharply, and by 1986 their shares of income were 40% and 15%, respectively. At the beginning of the Clinton Administration, another sharp increase began, and the top 10% moved to over 47% by 1998 and the top 1% rose to 22%. By 2007, the figure for the top 10% was back 50%, where it had peaked 80 years earlier. And the top 1%, similarly, was back near the 1928 level, at 23.5%.

Note that “[t]he same pattern held for the richest one-tenth of 1% (representing about 13,000 households in 2007): Their share of total income also peaked in 1928 and 2007, at over 11%.” [4]

So here was the situation in 2007:

Percentile % of Total Income

Top 0.1% 11%

Top 1 % 23.5%

Top 10% 50%

Let’s reflect on these numbers: The top 10% has as much income as everybody else; and one-half of what comes in to the top 10% goes to the top 1%. And the income of the top 1% is heavily concentrated at the very top.

In effect there are increasingly two economies, a wealthy “top” economy doing very well, and a “bottom” economy for roughly the bottom 99% facing income stagnation, with dwindling wealth and resources."

"Robert Reich puts it this way:

The wages of the typical American hardly increased in the three decades leading up to the Crash of 2008, considering inflation. In the 2002, they actually dropped. According to the Census Bureau, in 2007 a male worker earning the median male wage (that is, smack in the middle, with as many men earning more than he did as earning less) took home just over $45,000. Considering inflation, this was less than the typical male worker earned thirty years before. * * * But the American economy was much larger in 2007 than it was 30 years before. If those gains had been divided equally among Americans, the typical American would be more than 60 percent better off than he actually was by 2007. [6]"

Source: theatlanticcities .com; "The high Inequality of U.S. Metro Areas Compared to Countries" Oct. 9, 2012

"Income inequality in America has reached levels not seen since the Gilded Age. As Joseph Stiglitz, the Nobel Prize-winning economist, noted in June, “America has the highest level of inequality of any of the advanced countries — and its gap with the rest has been widening."

"The Martin Prosperity Institute's Zara Matheson mapped data for 362 metros (based on an analysis by the institute's Charlotta Mellander). The team used country-level data from the CIA's World Factbook and metro-level data from the U.S. Census Bureau's 2008-2010 American Community Survey. They relied upon the Gini coefficient as their measurement for inequality, which is a numerical rating on a scale from .00 (perfectly equal) to 1.00 (most unequal).

The Gini coefficient for the United States as a whole is .450, about the same as Iran and the Philippines. For comparison’s sake, the Gini coefficient for Sweden, the world’s most-equal country, is .230. Denmark’s is .248, Germany’s is .270 and Canada’s is .321. The most unequal countries in the world have Gini coefficients between .60 to roughly .70. Though none of America’s metros score that high, the picture is still not a pretty one. Most large metros (with over one million people) have inequality levels that are equal to or above the U.S. average.

The Bridgeport-Stamford-Norwalk (.537) metro — which includes not just the gritty factory town that gives it its name, but stately Westport and über-affluent Greenwich — shares a Gini ranking with Thailand (.536). “The richest Thais earn 14.7 times more than the poorest,” said Gwi-Yeop Son, an United Nations Development Programme representative, a few years ago. “The bottom 60 percent of the population's share of the income is only 25 percent.”
The disparity between New York’s (.504) richest and poorest is comparable to what you’d find in Swaziland (.504), a place not generally noted for its economic dynamism or quality of life (its average life expectancy is the lowest in the world).
Los Angeles’s inequality (.485) is the equivalent of the Dominican Republic (.484).
Chicago (.468) is like El Salvador (.469).
Detroit (.457) matches up with the Philippines (.458).
San Francisco's (.475) inequality is similar to Madagascar's (.475).
Dallas (.463) is like Malaysia (.462).
Inequality in Denver (.455) is comparable to Jamaica’s (.455).
Seattle’s Gini (.439) is similar to Nigeria (.437).

On the flip side, the Twin Cities of Minneapolis St. Paul (.436), Greater Washington, D.C. (.435), Las Vegas (.429), Honolulu (.421), Salt Lake City (.417), and several others stand out as having among the lowest levels of inequality, though these levels are in line with China (.415) and Russia (.422).

Just five U.S. metros have inequality levels below .4 — Fairbanks, Alaska (.399); Monroe, Michigan (.398); Appleton (.395) and Sheboygan (.393), Wisconsin; and Ogden-Clearfield, Utah (.389) — values which are still greater than the level of inequality found in India (.368)."

How the ultra-rich are pulling away from the ‘merely’ rich
Posted by Dylan Matthews
on February 19, 2013 at 2:56 pm

Thomas Piketty and Emmanuel Saez have for a decade now maintained the world’s best database on income inequality in various industrialized countries, and in the U.S. in particular. Their newest update (Excel), which extends the dataset to 2011, just came out last month. Here are five things to take away from it.

1. Yes, income inequality is increasing

Here’s how different groups’ shares of the income pie have changed from 1917 to 2011:

Inequality shrunk dramatically during the 1940s, stayed constant until about 1970, and since then the rich’s share of income has been growing. In 2011, 4.48 percent of all income in the United States was captured by the top 0.01 percent of Americans — a group of less than 16,000 households (or “tax units” in IRS parlance). That’s actually down from a peak of 6.04 percent in 2007. Of the top 10 years for the top 0.01 percent, eight have come since 2000; the other two were 1928 and 1929, right before the Great Depression.

2. Capital gains income is exacerbating the problem

Here’s a GIF comparing the above chart to an equivalent one that excludes capital gains income:

If you don’t look at capital gains, the top 0.01 percent only captures 3.15 percent of income in the United States. That’s about a third smaller a share as when capital gains are included. That suggests that capital gains income is exacerbating the income inequality problem.

3. The merely rich aren’t gaining ground as fast as the ultra-rich

The average member of the top 0.01 percent made $23,679,531 in 2011; the cutoff for membership in the group was $7,969,900. That’s a good deal less than 2007, when the average member of the group made $38,016,760. For comparison, the average member of the bottom 90 percent made $30,437 in 2011 and $35,173 in 2007. Because of the difference in scale, it’s hard to graph all these groups on the same scale, so I normalized them all such that their average income in 1917 equals 100:

Until the 1970s, the bottom 90 percent had actually seen its income grow more than any other income group. The income gap was shrinking. But the ultra-rich quickly reversed that trend. In 2007, the top 0.01 percent had an average income almost seven times that of 1917; the average income of the bottom 90 percent had barely tripled. The country has grown more unequal, not less, since then. And, interestingly, the 90-99th percentiles all saw their average income grow faster than all but the tippy-top of the top 1 percent. The divide between the rich and the rest isn’t the only gap growing, in other words. The gap between the ultra-rich and the merely rich is growing, too.